Back in March 2008, as the Credit Crunch was biting, the US Dollar, as measured by the US Dollar Index (USDX), was bottoming after a drop of over six years fuelled by the War on Terror. Silver had previous topped out at about $21 and was later to visit $50 as the dollar faced the abyss again just above the 70 level. To date, that level has been the all time low for the USDX.
Looking at the 45 year chart for the USDX, it is clear the dollar has been on a downward trajectory interspersed with some rallies since 1985. As of 2008, the dollar has been in an 8 year rally. It is no coincidence that gold and silver have struggled during this time and precious metal investors will be wondering when the dollar will resume its 31 year bear?
While writing for subscribers on the US Dollar, another look at the USDX chart suggested that the dollar bull was beginning to outstay its welcome. Lines have been drawn between each high and low to highlight each dollar bull and bear.
Let us tabulate these ups and downs below. As you can see, the USDX has experienced three bulls and three bears since 1971. What is interesting are the similarities in durations ranging from six year and four months to eight years and ten months. The average is 2798 days or seven years and eight months.
|
BEGIN |
END |
DURATION |
MOVE |
|
4th Jan 1971 |
31st Oct 1978 |
7Y 9M 28D (2858d) |
-32% |
|
31st Oct 1978 |
28th Feb 1985 |
6Y 4M 1D (2313d) |
+100% |
|
28th Feb 1985 |
30th Sep 1992 |
7Y 7M 3D (2772d) |
-47% |
|
30th Sep 1992 |
31st Jul 2001 |
8Y 10M 2D (3227d) |
+56% |
|
31st Jul 2001 |
31st Mar 2008 |
6Y 8M 1D (2436d) |
-42% |
|
31st Mar 2008 |
16th Dec 2016 |
8Y 8M 17D (3183d) |
+44% |
As this current dollar bull stands, it is now been on the go for eight years and eight months, which is one year above the average and two months off the longest ever bull. In other words, I would say this dollar bull is getting long in the tooth and will soon be replaced by a dollar bear which will run for an average of seven years and eight months.
What are silver and gold going to be doing during this approaching dollar bear? I would say the odds favour them heading strongly up within that time period.
What are the fundamentals of this cyclical prediction? I don’t know and I have no idea why the dollar should flit in and out of these 6-8 year cycles. But as for the next dollar bear, my bet is that a Trump administration is going to indulge in a dollar depreciation program that is not based on welfare or warfare, but rather heavy infrastructure spending which I shall call wall-fare in honour of that long structure he plans for the Mexican border.
…related: US Dollar & Gold
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